Vertical Pricing and Parallel Imports
Abstract
We generalize an earlier model of international vertical pricing to explain key features of parallel imports, or unauthorized trade in legitimate goods. When a manufacturer (or trademark owner) sells its product through an independent agent in one country, the agent may find it profitable to engage in parallel trade, selling the product to another country without the authorization of the manufacturer. Although parallel imports can be deterred when the manufacturer's wholesale price is sufficiently high, there is a trade-off between improving vertical pricing efficiency and reducing parallel imports. In equilibrium, parallel imports can come from a country with higher retail prices, which is consistent with some factual data. While countries have varying interests in such a policy, restricting parallel imports tends to increase global welfare when trade cost is high, but may reduce welfare when trade cost is low. This finding suggests that open parallel trading regimes may be most appropriate within regional trade agreements.Download Info
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Bibliographic Info
Article provided by Taylor and Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 14 (2005)
Issue (Month): 1 ()
Pages: 1-18
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Related research
Keywords: Parallel imports; vertical price formation; intellectual property rights;References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Granlund, David & Yesim Köksal, Miyase, 2011. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," UmeÃ¥ Economic Studies 831, Umeå University, Department of Economics.
- Ying Xiao & Udatta Palekar & Yunchuan Liu, 2011. "Shades of gray—the impact of gray markets on authorized distribution channels," Quantitative Marketing and Economics, Springer, vol. 9(2), pages 155-178, June.
- Raimondos-Møller, Pascalis & Schmitt, Nicolas, 2007.
"Commodity Taxation and Parallel Imports,"
Working Papers
04-2007, Copenhagen Business School, Department of Economics.
- Raimondos-Møller, Pascalis & Schmitt, Nicolas, 2010. "Commodity taxation and parallel imports," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 153-162, February.
- Raimondos-Møller, Pascalis & Schmitt, Nicolas, 2007. "Commodity Taxation and Parallel Imports," CEPR Discussion Papers 6580, C.E.P.R. Discussion Papers.
- Ganslandt, Mattias & Maskus, Keith E., 2007.
"Vertical distribution, parallel trade, and price divergence in integrated markets,"
European Economic Review,
Elsevier, vol. 51(4), pages 943-970, May.
- Ganslandt, Mattias & Maskus, Keith E., 2005. "Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets," Working Paper Series 639, Research Institute of Industrial Economics.
- Hsiu-Li Chen, 2009. "Gray Marketing: Does It Hurt the Manufacturers?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 37(1), pages 23-35, March.
- Ganslandt, Mattias & Maskus, Keith E., 2007.
"Wholesale Price Discrimination and Parallel Imports,"
Working Paper Series
702, Research Institute of Industrial Economics.
- Mattias Ganslandt & Keith E. Maskus, 2007. "Wholesale Price Discrimination and Parallel Imports," CESifo Working Paper Series 1951, CESifo Group Munich.
- Granlund, David & Köksal, Miyase Yesim, 2011. "Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?," HUI Working Papers 49, HUI Research.
- Granlund, David & Yesim Köksal, Miyase, 2012. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," HUI Working Papers 59, HUI Research.
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